Groupon shares slump close to $20 IPO price
Groupon shares fell to as low as $20.03 in late morning action before recovering slightly. The company was the third-largest decliner on the Nasdaq.
Groupon raised more than $700 million (447 million pounds) in an IPO in early November.
LivingSocial, Groupon's closest rival, announced plans on Monday to offer more than 20 deals with national merchants over the crucial Black Friday shopping period.
Daily deal companies often subsidize national deals, making them less profitable than offers run with local merchants. The national deals usually bring in lots of new customers, but pressure profit margins.
"In the last few days we've been hearing about LivingSocial stepping up promotions," said Edward Woo, an analyst at Wedbush Securities. "The concern is that there will be much more competition for Groupon going forward."
LivingSocial is offering deals of at least 50 percent off with companies including Verizon International Inc and Vodafone Group Plc's Verizon Wireless, Skechers USA Inc , OfficeMax Inc, Hearst Corp and New York Times Co on Black Friday.
On Monday -- known as Cyber Monday because consumers often shop a lot online that day -- LivingSocial is running 50 percent off deals with companies including Electronic Arts Inc, Blue Nile Inc and Hewlett-Packard Co's Snapfish.
LivingSocial's move to offer so many national deals shows competition in the daily deal business will be particularly intense this holiday, Woo added.
"Groupon is not doing much for Black Friday, so LivingSocial may take customer attention and business away from Groupon," he said.
Groupon unveiled its holiday plans just over a week ago, including one national deal with retailer American Apparel Inc, as well as discounts on products like electronics and home goods.
"The overhang of competition existed during the IPO and it still exists today," said Rick Summer, an equity analyst at Morningstar.
Groupon's shares were down $3.17, or 13.4 percent, at $20.41 in afternoon trading.
(Reporting by Alistair Barr; Editing by Derek Caney, Steve Orlofsky and Gerald E. McCormick)
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